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The structural transformation started in Japan during the last decades of the past century and the institutional adjustments that followed have significantly reshaped personal and functional income distribution patterns. In this paper we investigate the long-term drivers of the share of output accruing to labor in Japan. Our contribution lies in extending the theoretical SK schedule model by Bentotila and Saint-Paul to multiple inputs and in providing new empirical evidence on Japan over the period 1970-2012. Results indicate that low-knowledge-intensive market services were mainly responsible for the decline in the labor share in Japan over the four decades considered. This was related to technological change and, more importantly, to labor and product market structural and institutional features. These drivers could have significantly contributed to reducing the bargaining power of labor vis-à-vis employers and, consequently, the labor share. [ABSTRACT FROM AUTHOR]

Does localisation of procurements, sales and management contribute to the profitability of overseas affiliates? This study examines this question by analysing the performance of Japanese multinationals' manufacturing affiliates in China using an affiliate-level dataset for the period from 1989 to 2002 collected by the Ministry of Economy, Trade and Industry. We find that even though foreign multinationals often seem to enter China for the local market potential, affiliates with a higher local sales ratio tend to be less profitable - a pattern that is conspicuously different from that observed for Japanese affiliates in other regions such as the USA or the ASEAN4, where local sales orientation has a positive impact on profitability. On the other hand, we find that Japanese affiliates' profitability was positively associated with their local procurement ratio. Using the coefficients of the profit function estimated from data on all Japanese manufacturing affiliates around the world, we calculate the effect of local sales and procurements on profitability by country, controlling for the level of GDP and per capita GDP. In the case of China, the localisation effects are positive following the country's accession to the WTO, suggesting that both local procurement and sales expansion contribute to higher profitability in China. [ABSTRACT FROM AUTHOR]